ETS Tax Intelligence: Ohio Savings Opportunity
Ohio is one of many states that offers employers the opportunity to utilize voluntary contribution (“VC”) and joint account (“JA”) strategies to reduce state unemployment insurance (“SUI”) tax costs. VC strategies (available in 26 states) allow employers to “buy down” their SUI tax rate, while JA strategies (available in 12 states) allow employers to combine the tax rating experience of two or more legal entities to achieve an overall lower SUI tax cost. Ohio only requires employers to remain in a JA for one year, which reduces the risk that changing circumstances of one employer could taint the combined SUI tax rate for all the JA members.
Ohio employers, to maximize savings, must become familiar with the guidelines relating to VCs and JAs. Additionally, they should initiate a systematic process for assessing the savings opportunities available each year, including the possibility of utilizing a combination of VC and JA elections.
Ohio VC/JA Guidelines
An experience rated employer in Ohio is eligible to take advantage of a VC, with an opportunity to “buy-down” multiple rate brackets. Employers must be mindful of VC restrictions related to receipt of a revised tax rate notice (“TRN”). As such, if an employer anticipates any merger, acquisition, reorganization, or divestiture (“M&A”) activity, an analysis should be performed to assess the impact of a VC on the anticipated revised tax rate (resulting from the M&A event) to determine profitability prior to the VC payment deadline.
For JA purposes, Ohio requires employers to meet the following four requirements: 1) be eligible for a merit rating based on the employer’s own individual experience; 2) have a positive reserve account balance; 3) be owned and controlled directly or indirectly by the same interest; and 4) not have transferred unemployment experience to another employer during the 3rd or 4th calendar quarter just prior to the year the JA is to apply. The Ohio JA (also referred to as a “Common Rate Group”) application requires employers to provide the names, addresses, account numbers, and a statement explaining ownership common to each of the applicants. Once approved, each member participating in the JA continues to file their own quarterly contribution reports and make separate SUI tax payments.
Systematic VC/JA Processes
With a late November expected mail date for 2017 Ohio TRNs and with VC/JA application deadlines of January 3, 2017, employers face tight turnaround times to receive the TRNs, review them for accuracy, analyze all possible savings opportunities, and submit timely applications to the Ohio Department of Job and Family Services (“ODJFS”).
In preparation for the foregoing steps, employers should ask themselves a few questions: Who has the knowledge and availability to run the analyses for all possible JA combinations? How quickly can we obtain a check to fund the VC? Is there an authorized representative or officer available to sign the JA application? Having a systematic process in place is key to realizing the potential savings associated with VCs and JAs. After implementation of a VC and/or JA strategy, employers must be diligent about their follow up with the ODJFS to verify the proper assignment of revised TRNs. The above hypothetical example illustrates a simplified Ohio VC/JA analysis.
Equifax assists employers operating in Ohio, and other VC/JA states, with implementing tax saving strategies, including assessing potential risks and rewards. For more information, please contact Pete Krieshok at (314) 214-7325, or via e-mail at email@example.com. You can also visit our corporate blog for information on other employment tax matters that might impact your organization.
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